Withholding Tax Card 2016/2017: payments for goods and services

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KARACHI: The Federal Board of Revenue (FBR) has updated withholding tax rates on payments for goods, services and contracts applicable for filers and non-filers of income tax returns during fiscal year 2016/2017.
The rate of withholding tax under Section 153 of Income Tax Ordinance, 2001 on payments for goods, services and contracts.—
Sub-section (1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or:—
(a) for the sale of goods;
The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (1) of section 153 shall be –
(a) in the case of the sale of rice, cotton seed or edible oils, 1.5 percent of the gross amount payable; or
(ab) in the case of the supplies made by the distributors of fast moving consumer goods, 3 percent of the gross amount payable, if the supplier is a company and 3.5 percent if the supplier is other than a company.
(b) in the case of sale of goods,—
(i) in case of a company, 4 percent of the gross amount payable, if the company is a filer and 6 percent if the company is a non-filer; and
(ii) in any other case, 4.5 percent of the gross amount payable, if the person is a filer and 6.5 percent if the person is a non-filer;
(b) for the rendering of or providing of services;
The rate of tax to be deducted from a payment referred to in clause (b) of sub-section (1) of section 153 shall be —
(i) in the case of transport services, two per cent of the gross amount payable; or
(ii) in the case of rendering of or providing of services, —
(a) in case of a company, 8 percent of the gross amount payable, if the company is a filer and 12 percent if the company is anon-filer; and
(b) in any other case, 10 percent of the gross amount payable, ifthe person is a filer and 15 percent if the person is a non-filer;
(c) in respect of persons making payments to electronic and print media for advertising services,—
(i) in case of a filer, 1.5 percent of the gross amount payable; and
(ii) in case of a non-filer, 12 percent of the gross amount payable, if the non-filer is a company and 15 percent if the non-filer is other than a company;
(c) on the execution of a contract, including contract signed by a sportsperson but not including a contract for the sale of goods or the rendering of or providing services, shall, at the time of making the payment, deduct tax from the gross amount payable (including sales tax, if any) at the rate specified in Division III of Part III of the First Schedule.
The rate of tax to be deducted from a payment referred to in clause (c) of sub-section (1) of section 153 shall be-
(i) 10 percent of the gross amount payable in case of sportspersons;
(ii) in case of a company, 7 percent of the gross amount payable, if the company is a filer and 10 percent if the company is a non-filer; and
(iii) in any other case, 7.5 percent of the gross amount payable, if the person is a filer and 10 percent if the person is a non-filer.
Sub-section (2) Every exporter or an export house making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person for rendering of or providing services of stitching, dying, printing, embroidery, washing, sizing and weaving, shall at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division IV of Part III of the First Schedule
The rate of tax to be deducted under sub-section (2) of section 153 shall be 1 percent.
Sub-section (3) The tax deductible under clauses (a) and (c) of sub-section (1) and under sub-section (2) of this section, on the income of a resident person, shall be final tax.
Provided that,—
(a) tax deducted under clause (a) of sub-section (1) shall be adjustable where payments are received on sale or supply of goods, by a, —
(i) company being a manufacturer of such goods; or
(ii) public company listed on a registered stock exchange in Pakistan;
(b) tax deductible shall be a minimum tax on transactions referred to in clause (b) of sub-section (1), provided that-
(i) where the aforesaid minimum tax for providing or rendering services, in respect of sectors as specified in clause (94) of Part IV of the Second Schedule is in excess of tax payable under Division II of Part. I of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year;
(ii) where the excess tax is not wholly adjusted, the amount not adjusted shall be carried forward to the following tax year and adjusted against tax liability under the aforesaid Part for that year, and so on, but the said excess shall not be carried forward to more than five tax years immediately succeeding the tax year for which the excess was first paid; and
(iii) the said excess amount shall not be carried forward in case of a company for which provisions of this clause are not applicable under clause (94) of Part IV of the Second Schedule;
(c) tax deducted under clause (c) of sub-section (1) shall be adjustable if payments are received by a public company listed on a registered stock exchange in Pakistan, on account of execution of contracts;
(d) tax deducted under clause (c) of sub-section (1) in respect of a sportsperson shall be final tax with effect from tax year 2013; and
(e) tax deducted under clause (b) of sub-section (1) by person making payments to electronic and print media for advertising services shall be final tax with effect from the 1st July, 2016.
Sub-section (4) The Commissioner may, on application made by the recipient of a payment referred to in sub-section (1) and after making such inquiry as the Commissioner thinks fit, may allow in cases where tax deductible under sub-section (1) is adjustable, by an order in writing, any person to make the payment,—
(a) without deduction of tax; or
(b) deduction of tax at a reduced rate.
Sub-section (4A) The Commissioner, on an application made by the recipient of a payment referred to in clause (94) of Part IV of the Second Schedule, in cases where the said recipient has fulfilled the conditions as specified in the said clause, by an order in writing for a period of at least three months, may allow any person to make the payment without deduction of tax in respect of payments as referred to in clauses (b) of sub-section (1) of section 153:
Provided that the recipient of the payment has made advance payment of tax equal to two percent of the total turnover of the corresponding period of the immediately preceding tax year.
Sub-section (5) Sub-section (1) shall not apply to —
(a) a sale of goods where the sale is made by the importer of the goods and tax under section 148 in respect of such goods has been paid and the goods are sold in the same condition as they were when imported;
(b) payments made to traders of yarn by the taxpayers specified in the zero-rated regime of sales tax (as provided under clause (45A) of Part-IV of the Second Schedule);
(c) a refund of any security deposit;
(d) a payment made by the Federal Government, a Provincial Government or a Local Government to a contractor for construction materials supplied to the contractor by the said Government or the authority;
(e) deleted
(f) the purchase of an asset under a lease and buy back agreement by a modaraba, leasing company, banking company or financial institution; or
(g) any payment for securitization of receivables by a Special Purpose Vehicle to the Originator.
Sub-section (6) Where any tax is deducted by a person making a payment for a Special Purpose Vehicle, on behalf of the Originator, the tax is credited to the Originator.
Sub-section (7) In this section, —
(i) prescribed person means—
(a) the Federal Government;
(b) a company;
(c) an association of persons constituted by, or under law;
(d) a non-profit organization;
(e) a foreign contractor or consultant;
(f) a consortium or joint venture;
(g) an exporter or an export house for the purpose of sub-section (2);
(h) an association of persons, having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year;
(i) an individual, having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent year; or
(j) a person registered under the Sales Tax Act, 1990;
(ii) services includes the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers, otherwise than as an employee;
(iii) sale of goods includes a sale of goods for cash or on credit, whether under written contract or not;
(iv) manufacturer means a person who is engaged in production or manufacturing of goods, which includes—
(a) any process in which an article singly or in combination with other articles, material, components, is either converted into another distinct article
or product is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or
(b) a process of assembling, mixing, cutting or preparation of goods in any other manner; and
(v) turnover means—
(a) the gross sales or gross receipts, inclusive of sales tax and federal excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods;
(b) the gross fees for the rendering of services for giving benefits including commissions;
(c) the gross receipts from the execution of contracts; and
(d) the company’s share of the amounts stated above of any association of persons of which the company is a member.

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